(LHP Graphic/Allison Bell)

Consumers who want to organize class actions against health care discount card programs should go to state court, not federal court, according to a 3-judge panel at the 6th U.S. Circuit Court of Appeals.

The panel issued the ruling in response to Daniel Pilgrim et al. vs. Universal Health Care LLC et al. (Number 10-3211 and Number 10-3745).

The plaintiffs in the case are consumers who bought health care discount cards from a program developed by Coverdell & Company Inc., Chicago, and advertised and sold by Universal Health Card LLC, Massillon, Ohio.

The consumers have argued that the cards were worthless because the providers who were supposed to be in the card program network had not heard of the program and refused to give card holders the advertised discounts, Circuit Judge Jeffrey Sutton writes in an opinion for the 6th Circuit panel.

Lawyers for Pilgrim and another card owner, Patrick Kirlin, sued Universal and Coverdell in the U.S. District Court in Akron, Ohio. Pilgrim and Kirlin are trying to represent a nationwide class of discount card program members.

The plaintiffs said the defendants had violated the Ohio Consumer Sales Practices Act and Ohio common law prohibitions against unjust enrichment, Sutton writes.

Universal Health Card has argued that the case is a poor candidate for being handled as a national class action, because Ohio has choice-of-law rules that would require a court to analyze each class member’s claim under the law of that class member’s home state.

The district court dismissed the lawsuit, arguing that it lacked jurisdiction over the subject matter.

The 6th Circuit panel has agreed with the district court’s line of reasoning. The panel turned down the plaintiffs’ request for class-action status and dismissed the suit “without prejudice,” meaning that the parties can try to revive the case in state court.

To let the plaintiffs continue the suit as a national class action in federal court “would permit companies to ‘evade [local] consumer protection laws by locating themselves just across the [border] from the . . . citizens they seek as customers,’” Sutton writes, quoting an earlier case. “And it would permit nationwide companies to choose the consumer-protection law they like best by locating in a state that demands the least. Does anyone think that, if State A opted to attract telemarketing companies to its borders by diluting or for that matter eliminating any regulation of them, the policy makers of State B would be comfortable with the application of the ‘consumer-protection’ laws of State A to their residents?”

The discount card program involved in the case operated differently in different states, and the allegations about provider network problems involve factual issues that will vary from place to place, Sutton says.

Representatives for Coverdell declined to comment on the ruling.

Representatives for Universal Health Card and the card buyers did not immediately return telephone calls seeking their comments.